Tuesday, March 1, 2011
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GENEVA — The mood among carmakers at the Geneva auto show this year might be described as nervously confident. Yes, sales around the world are up, emerging markets are booming, and the car companies are introducing fleets of new models. Heck, even General Motors is profitable again.
“If you smell the atmosphere, it is far better than a few years ago,” said Luca di Montezemolo, the chief executive of Ferrari and former chairman of Fiat. “I did not expect a recovery so quickly.”
At the same time, oil prices are soaring, pushing buyers toward less profitable smaller cars. The Middle East is in turmoil. And economic recovery in the United States and Europe is still spotty.
“A lot of national economies are still on performance-enhancing drugs,” said Norbert Reithofer, the chief executive of Bayerische Motoren Werke, referring to economic and car-buying stimulus programs. “It will be interesting to see what happens when the dope gets taken away.”
Even if the overall economic trend remained positive for carmakers, executives at Geneva said, they would have to contend with shocks and setbacks. “We have to expect more ups and downs,” Mr. Reithofer said in an interview.
Economic uncertainty is particularly cruel to automakers, which must risk billions developing new models and equipping factories years before the products come to market. A wrong bet can be costly. The last time that oil prices spiked, for example, executives at Daimler decided that U.S. buyers were ready for small city cars. They began selling the two-seat Smart in America. At first sales boomed, but they plunged when gas prices went down. “Everybody was convinced that it was the end of pickup trucks and the Fiat 500 was our future,” Dieter Zetsche, the chief executive of Daimler, told a small group of reporters on Tuesday. “One year later you have the same structure as before the crisis.”
Now executives at Daimler are preparing for the possibility that buyers in regions like Europe will equip their Mercedes cars with smaller engines, which are more fuel efficient but less profitable.
To further complicate the picture, carmakers must invest in new fuel-saving technologies, and most are working on battery powered cars — unless, like Renault and Nissan, they are already bringing them to market. The French and Japanese companies, which cooperate closely, displayed a range of electric models in Geneva, including the Nissan Leaf and a two-seat Renault called the Twizy.
Carmakers are sharing the costs of some new technologies to reduce risk and achieve economies of scale. Daimler cooperates with Renault and Nissan, while BMW and PSA Peugeot Citroën announced on Monday a new joint venture to develop components for hybrid cars.
Another risk is China, which has become the biggest car market in the world. Carmakers are watching closely to make sure that they are not caught off guard by a sudden slowdown in sales there.
Audi, the premium car unit of Volkswagen, conducts a detailed assessment of the Chinese market every six months, said Peter Schwarzenbauer, a member of the company’s management board in charge of marketing and sales. “When you talk about China you have to take the long view,” Mr. Schwarzenbauer said. “We don’t believe it will continue to grow 30 or 40 percent a year.” Growth of about 10 percent a year is more realistic, he said.
The auto executives in Geneva were not dwelling too much on the potential downsides ahead. On the contrary, they expressed their newfound brio with model launchings ranging from a new sporty two-door version of the Mercedes midrange C Class to a four-seat Ferrari, the FF, that marks the company’s entry into the family car market, albeit for families with a vehicle budget of several hundred thousand dollars.
Ferrari promoted the new car with a film showing the four-wheel drive beast plowing through snow and across expanses of desert sand, an illustration of how carmakers are targeting increasingly wealthy emerging markets like Russia and Brazil, where roads may not always be suitable for a low-slung Italian stallion.
But as turmoil in the mideast shows, those markets may be less stable than traditional markets like Europe or the U.S., adding another layer of uncertainty.
Mr. di Montezemolo said he was concerned about the Mideast market, although it does not account for a large percentage of Ferrari sales. While the turmoil has not yet hit countries like Saudi Arabia, which has the most Ferrari buyers, Mr. di Montezemolo said the political upheaval could hurt sentiment.
“With what is happening there, people may not be in a mood to buy,” he said.
Joachim Schmidt, head of sales and marketing at Daimler, pointed out that sales last year were so strong that the company suffered from parts shortages. This year Daimler expects car sales to top precrisis highs.
But Mr. Schmidt added, “Having this crisis behind us, we have to be cautious. We have to be close to our markets on a monthly basis.”
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